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Thursday, March 28, 2013

Ασφάλεια Καταθέσεων

Πολύ κουβέντα γίνεται, ιδιαίτερα στα τηλε-καφέ, για το πόσο ¨κινδυνεύουν οι καταθέσεις" και για το πόσο ασφαλείς αισθάνονται οι καταθέτες, εδώ και στην Ευρώπη! .... Μπούρδες!... και "κουβέντα να γίνεται"!.
Και όμως, αυτές οι μπούρδες, που εκστομίζονται απο τις αδαείς τηλε-περσόνες του MEGA, ANT1, SKAI, και ΝΕΤ, έχουν φέρει αποτέλεσμα: έχουν διαμορφώσει άποψη.
Το ΒΗΜΑ/on-line κάνει ψηφοφορία με το ερώτημα: "πόσο ασφαλείς αισθάνεστε για τις καταθέσεις σας;" Οι απαντήσεις μέχρι τώρα είναι 604 στο σύνολο. (μία είναι δική μου). Στατιστικά, όχι κακός αριθμός απαντήσεων.
Το σημαντικό, και τραγικό, είναι οτι το 65% απαντά "λίγο" ή "καθόλου".

Εγώ, τώρα, γιατί ψήφισα "πολύ"; Είμαι τόσο μπουμπούνας; Καλά, εντάξει, αλλά τόοοοσο, ρε γ.....?

Πού κάνω λάθος στο συλλογισμό μου; (υπόχρεος σε όποιον μου ανοίξει τα στραβά!, και με αμοιβή!).
Ας υποθέσουμε οτι έχω κατάθεση στη ΧΨΩ τράπεζα 90Κ ΕΥΡΩ. (Έχω κι άλλα φράγκα; αυτά όμως είναι σε χαρτοφυλάκιο με μετοχές ( Φρανκφούρτη, Λονδίνο, κλπ.), bunds, gilds, treasuries, corporate bonds, ... και δέν συμμαζεύεται! Δέν ξέρω πόσα έχω γιατί, όπως είπε ο Lamar Hunt: "Αν ξέρεις πόσα έχεις, δέν έχεις αρκετά!" .
Έ!, ΔΕΝ φοβάμαι: γιατί άν η ΧΨΩ τράπεζα χρεοκοπήσει, η χώρα που έχει έδρα η ΧΨΩ, εγγυάται την κατάθεσή μου! (τελεία).
Άν βέβαια χρεοκοπήσει η χώρα, είναι άλλο "καπέλλο".

Άν κάποιος, γιατρός ή χασάπης,  έχει κατάθεση, ας πούμε, 300Κ ΕΥΡΩ και με ρωτήσει σχετικά, θα του απαντήσω:
" Αυτό που έχεις, δέν είναι κατάθεση, αλλά επένδυση. Ζύγισες απόδοση/ρίσκο και τα "πάρκαρες" στην τράπεζα. Άν φοβάσαι οτι η τράπεζα μπορεί να χρεοκοπήσει, πάρτα απο αυτήν και πήγαινέ τα σε μια άλλη. Ποιά; Σ'αυτήν που σου δείνει επιτόκιο "αγοράς" όχι μεγαλύτερο.

Σοβαρά, τώρα: Σε Ελλάδα και Γερμανία, πάνω απο το 90% των καταθέσεων είναι σε λογαριασμούς κάτω των 100Κ  Εγγυημένες δηλαδή απο Ελληνικό και Γερμανικό Δημόσιο αντίστοιχα.
Στην Κύπρο, αυτές οι καταθέσεις είναι περί το 75%

Δικαιολογείται λοιπόν το 65 % των επισκεπτών στο ΒΗΜΑ/on-line που δηλώνουν "λίγο"+"καθόλου" ασφαλείς;

Wednesday, March 27, 2013

Krugman suggests that Cyprus should exit the EZ

Ignoring of course the "politics", or rather geo-politics, of such a decision.

Getting to the same point by cutting nominal wages would take much longer and inflict much more human and economic damage.

Otherwise, we’re talking about Greek-level austerity or worse in an economy whose fundamentals, thanks to the implosion of offshore banking, are much worse than Greece’s ever were.

And he comes back with a new post dealing with the matter of the debt. He asks, answering the question: Wouldn't an exit make that debt unsupportable, and force default?"

" ...what makes you think that Cyprus can avoid default even if it stays on the euro? " 

Monday, March 25, 2013

How stupid can Dijsselbloem get?

Great fun reading Paul Murphy's entry at FT Alfaville with an extensive quote from an interview the Chairman of the Eurogroup gave to FT and Reuters.
Reading the quote itself is depressing; readers with high blood-pressure, you have been warned!

IMF: EE Financial System Stability Assessment

The IMF has published its assessment for the European Union (pdf). The reader of the report should have in mind Brad DeLong's "Lessons from History".

Phew! Cyprus will be "saved", at last

About what has happened on the Cyprus bail-out, three posts are necessary and sufficient:

For a really good evaluation of the power play, John Cassidy at the New Yorker blog thinks that "The E.U. and Germany Are Right to Bully Cyprus".
Charlemagne of The Economist says "A better deal, but still painful"
(the) .."deal that is similar to the solution first proposed by the IMF, which was backed by Germany but rejected by Cyprus (and to some extent by the European Commission). 
At one point, participants said, Mr Anastasiades threatened to resign, even to pull Cyprus out of the euro zone. In the end, he relented. The European leaders, fed up with Cyprus’s tactics, had refused to yield. 
"Perhaps the biggest question is this: once the banks have been cleaned up and shrunk, where will Cyprus find economic growth? The promise of offshore gas deposits is still too uncertain, and tourism may well decline if Russians suddenly find the island to be less hospitable to their money."

Joseph Cotterill at FT Alphaville  is a must read for background and developments,  

Sunday, March 24, 2013

Hugo Dixon: Cypriots keep making mistakes

Hugo Dixon at Reuters Breakingviews is censoring the Cypriot political elite for:

  1. Overestimating their negotiating position,
  2. "The last Communist government was also criminal in its failure to act as the crisis in Greece threatened to swamp Cyprus." ss. Narrow-mindedness on the part of AKEL put precedence to the political cycle in Cyprus as compared to the one in Germany.
  3. "Nicos Anastasiades, has managed to turn a crisis into a disaster by initially backing a plan to impose a 6.75 percent tax on insured depositors."...." There was an alternative: tax the uninsured depositors at 15.5 percent and leave the insured ones untouched. Anastasiades didn’t want to do this as it would have angered Russia and undermined Cyprus as an offshore financial centre. But both of these have happened anyway."

He goes on to conclude that
 Last week, (Cyprus) had a chance of salvaging most of its
financial centre. Now that will be largely destroyed.  Last week
it was staring at a middling recessio. Now, with confidence crushed, its economy faces a slump.
He also comes to the conclusion that last week's figures are already out of date.



Friday, March 22, 2013

ΑΥΓΗ και το "μπλέ" χαππάκι!

Είμαι της άποψης οτι ένας αριστερός -όποιου ορισμού- προτιμά το "κόκκινο" χαππάκι του ρεαλισμού και όχι το "μπλέ" της άγνοιας και της φαντασίωσης.
Με διαψεύδει κύριο άρθρο στην ΑΥΓΗ http://left.gr/news/i-kypros-kai-petagma-tis-petaloydas 

Τα χρηματηστήρια παγκοσμίως καταρρέουν και έρχεται χρηματοπιστωτικός Αρμαγεδώνας -ίσως καταρεύσει και ο καπιταλισμός προς χάριν του Π.Λαφαζάνη- αφού "το Κυπριακό αποδεικνύεται διεθνές πρόβλημα"  και "Η κρίση προσλαμβάνει συστημικές διαστάσεις"

"Το "όχι" των Κυπρίων, το μήνυμα της αντίστασης και ...  εγγράφεται στην αφύπνιση του ευρωπαϊκού Νότου ... " ...εδώ ο συντάκτης βρίσκεται βαθειά μέσα στον χώρο του επιθυμητού!

"Ένας μικρός λαός, με συνείδηση της Ιστορίας του ("αιώνες φαρμάκι, γενιές φαρμάκι"), αντιπροτείνει τη δημοκρατική εγρήγορση, το δικαίωμά του να αποφασίζει αυτός τελικά για το μέλλον του,"  
Απόλυτη συμφωνία, με την προϋπόθεση οτι "το ΟΧΙ" σημαίνει οτι δέν θέλουν τα δανεικά, που είναι στο τραπέζι.

"Ένας μικρός λαός διεκδικεί την εθνική αξιοπρέπειά του. Αναζητεί διεθνείς συμμαχίες και κατορθώνει να συγκροτεί, έστω με τις εύλογες ατέλειες, ένα εναλλακτικό σχέδιο."
Αυτό ακριβώς το σχέδιο περιμένουν οι καταρρέουσες αγορές. Να δούμε όμως και σε ποιό βαθμό είναι "εναλλακτικό".

Έχει και άλλα τέτοια το άρθρο. Το ερώτημα είναι: γιατί γράφονται τέτοια προφανώς αστήρικτα και για ποιούς; Μήπως με την ΑΥΓΗ δίδεται και "μπλέ" χαππάκι;

ΣΣ. Άν ο συντάκτης χρησιμοποίησε τόν όρο "νέο παράδειγμα" κάνοντας αναφορά στον Thomas Kuhn, μάλλον δεν κατάλαβε τί διάβασε, πράγμα που δέν με εκπλήσει



Thursday, March 21, 2013

The Cyprus Drama is Nearing Climax

Jan Strupczewski and Luke Baker of Reuters report from Brussels that they spoke to a senior EU official and that things are coming to a head.

As the news was coming in about a Cabinet Meeting and a subsequent Parliamentary vote on a new scheme (Plan B, I hope, not a Plan-Zero) I was reading the pseudonymous Pawelmorski 's post and the very real Matina Stevis column at the online/ Wall Street Journal. Top notch commentary and reporting, respectively.

I also had great, and stimulating, fun taking up the challenge posed by Daniel Davies at Crooked Timber and played "the game".
My winning sequence: steps 1-10-25-37-33-16-29-19  

" Η Ελλάδα είναι θωρακισμένη" ....

... διαβάζω σε ρεπορτάζ του Γιώργου Μπουρδάρα στην σημερινή ΚΑΘΗΜΕΡΙΝΗ οτι αυτό εκστόμισε ο Γιάννης Στουρνάρας χτές στην Βουλή....Μπρρρρ...!!!
Ήμουν στο Λονδίνο τέλος Οκτ. με αρχές Νοεμβ. του 2008. Γινόταν ο ...ερ, χαμός. Είχε μόλις χρεοκοπήσει η Lehman Bros., τα πρωτοσέλιδα των Αγγλικών εφημερίδων, σε καθημερινή βάση, ήταν γεμάτα με 10δες χιλ. απολύσεις, κλείσιμο εταιρειών, κλπ.
Όλοι οι σοβαροί σχολιαστές έκρουαν την κουδούνα για επερχόμενο παγκόσμιο χρηματοπιστωτικό Αρμαγεδώνα άν δέν παρθούν γρήγορα αποφάσεις σε επίπεδο USA/FED, GB/BoE, EU/ECB, G-7, G-20 και δέν συμαζεύεται. Με μιά λέξη: πανικός.
Μέσα Νοέμβρη 2008  επέστρεψα στην Αθήνα και στην .... ψύχραιμη ηρεμία!
Όλη η Ελληνική ελίτ, πολιτική, επιχειρηματική, ΜΜΕ, κλπ. ασχολιόντουσαν με το τί συμβαίνει ... αλλού!
Το αποκορύφωμα της αυταπάτης ήταν όταν είδα τον Γιώργο Αλογοσκούφη στο MEGA και άκουσα να λέει: " Η Ελληνική οικονομία είναι θωρακισμένη".
Την ιστορία την ξέρουμε.

Wednesday, March 20, 2013

Cyprus:"It's now or never"...

..sang Elvis some 50+ yrs ago.
The political elite in Cyprus knew for a long time that Cyprus had to come up with about 6 bln. to supplement the loan from EZ+IMF, that could not be significantly more than about 10 bln.
Why? Because that 10 bln. loan makes total sovereign debt just sustainable (or not) . The government in Cyprus is looking for these funds now, as they were of the opinion that Cyprus, being a systemic risk for the EZ, would in the end enjoy  full funding of the 16 bln. with loans from the EZ+IMF. Reckless thinking? Probably, but more likely inadequate and/or hubristic preparation for the negotiation climax.
Today, the ECB Governing Council will most likely put further ELA for the Cypriot Banks on auto pilot, which means that recapitalization of the banks must be agreed before they open for business again.
The EZ+IMF do not  "blink"first.

Ben Hall and Peter Spiegel at the FT wrote the definitive column for the current situation in Cyprus.

Cyprus says: Thanks, but NO thanks

What now? Plan B anywhere?

EuroZone said: Here's 10 bln. for you. You need 6 bln more, that you collect from deposits with your banks. I 've done my bit. Nice to have known you, bye!

Links
Felix Salmon at Reuters comment and Schumpeter at THE ECONOMIST don't much believe there is a Plan B
Dimitry Afanasiev at the FT says that Russia should chip in the missing 6 bln
Clive Crook at Bloomberg View sees a bank run when banks open eventually. So,  the "damage is done"
Zsolt Darvas of Bruegel thinks that "At stake are nothing less than a complete meltdown of the Cypriot banking system and a possibly uncontrolled exit from the euro area."

For a much more comprehensive view, as always, here is Martin Wolf at the FT 

Tuesday, March 19, 2013

The Cyprus Bailout II

In my yesterday's post on the subject, I complained that I had not found "a single point" in favour of the decision.
I admit I was a bit impatient, as Willem Buiter in a column for the FT Long Room (thanks extended to Paul Murphy of FT Alfaville) thinks that:
The Cypriot bank creditor bail-in is a net positive for the euro area...
OMG! Of course his arguments are well thought through, and you better see for yourselves.

Urgently important
Felix Salmon at Reuters Comment draws our attention to the proposal of Lee C. Buchheit and G. Mitu Gulati  (3 page pdf) titled Walking Back from Cyprus.
There is still time (Tuesday 17:42) for the Cypriot President to propose this to Parliament. As Felix Salmon says:
Buchheit and Gulati have now given Cyprus’s parliament a clear Plan B. If the lawmakers want to reject the Eurogroup’s plan, they know what they must do.   

By the way, Ryan McArthy's Counterparties entry today , titled "Insane in the Mediterranean" is devoted to the subject. 

Charles Wyplosz at voxeu thinks that All the conditions for a total disaster are in place

Monday, March 18, 2013

The Cyprus bailout

Highway roberry, that is!
May we expect a bank-run in Cyprus? Hm... in Greece?.. in Italy?... in Spain?
I haven't found one single point in favour of the levy after about 4-5 hours of looking.
Probably David Beckworth's post at Macro and Other Market Musings is a good starting point. One can branch out following his links to everything interesting written on the topic. One small quote:
But that part is not new. What is new is the unexpected seizing of depositors funds. As Lars Seier ChristensenEd ConwayFelix Salmon, and Frances Coppola note, this sets a dangerous precedent for all Eurozone bank deposits.  Here is Coppola:
[T]he fact is that deposit insurance everywhere in the EU has now been undermined. The precedent has been set for insured depositors to suffer losses in order to protect Russian oligarchs and reckless banks. If the Eurogroup can impose this on Cyprus, it can do so elsewhere too.

Mohamed El-Erian is all gloom about the EZ

In his piece for the March/April issue of Foreign Policy, Mohamed El-Erian is scathing policymakers in the EZ about their inability or indecisiveness to come up with solutions to the on-going and deepening crisis.
There is no easy solution for the struggling European countries. Yet the longer political leaders shy away from the tough decisions, the greater the chance that there will be a lot more of them. And soon.

Update:  See also his views, and rationalisation, of the Cyprus bailout his column at the FT A-list d/d 18/3  "A muddled and risky approach to Cyprus" 

Saturday, March 16, 2013

Λιτότητα

Το "απολογητικό" κείμενο της Επιτροπής: Fiscal policy in Europe: Searching for the right balance απο τους Marco Buti και Nicolas Carnot στο Voxeu και το σχόλιο του Paul Krugman : Delusions at the European Commission


Germany’s labour market Wunderreform and update

THE ECONOMIST
http://www.economist.com/news/europe/21573583-ten-years-how-does-germanys-agenda-2010-package-rate-wunderreform


WHEN Gerhard Schröder took to the podium in the Bundestag on March 14th, 2003, Germany was called the “sick man of Europe”. More than 4m Germans (11.6% of the workforce) were on the dole. A widespread assumption was that unemployment could never be defeated, merely “administered,” says Wolfgang Clement, who was the former chancellor’s labour and economics minister. Countering that spirit, Mr Schröder unveiled a package of reforms that he called Agenda 2010. The leader of the opposition, a little-known physicist from east Germany called Angela Merkel, derided it as unambitious. But it soon became clear that the agenda would transform Germany’s labour market.
Ten years later, what is the verdict? Financial crises be damned, Germany stands as an economic beacon, with record employment and the lowest youth unemployment in Europe (see chart). Some countries are studying Agenda 2010 as if it were a manual. Mr Schröder is being feted at conferences all over the world.

The aim was to make Germany’s labour market flexible again. It allowed small businesses to fire more easily, thus lowering their risk of hiring. It liberalised other rules, such as those for part-time and temporary work. Above all, it merged two types of benefits—federal assistance for the unemployed and municipal welfare payments—into one guarantee of a basic living standard (called Hartz IV, after the former Volkswagen manager who proposed it).
Only the Germans themselves, and notably Mr Schröder’s own Social Democrats (SPD) and the Greens, who were his coalition partners, seem unsure whether Agenda 2010 was a blessing or a curse. Now in opposition, but hoping this year to defeat Mrs Merkel, who replaced Mr Schröder as chancellor, the SPD cannot exactly disavow its own reform. But it is signalling to its blue-collar base and its own left wing that it might undo parts of it.
The reform package also included rules that prod the unemployed into seeking, and accepting, work. Their time on benefits is limited to one year, or 18 months for those older than 55. And they cannot be picky about the jobs they take. This is what Mr Schröder calls “Fördern und Fordern”, a play on an umlaut that translates roughly as “assist and challenge”.
Politicians like Dietmar Bartsch of the Left, a party of former Communists from East Germany and radicals from the west, many of whom defected from the SPD after Agenda 2010, find the “challenging” undignified. By his telling, Germany’s employment boom is in fact a state-sponsored poverty programme, where armies of the underemployed eke out miserable wages in dead-end jobs.
Not so, says Michael Hüther, director of the Cologne Institute for Economic Research, an employer-financed think-tank. Low-wage jobs rose mainly in the years before Agenda 2010 and have stayed constant since. Although the number of part-time jobs has grown, many of the people who have them in fact want them, so that they can, for example, care for children as well.
Agenda 2010 does not deserve all the credit for Germany’s success. Restrained growth in wages and healthy demand for exports were at least as important. But Germany would be foolish to ignore a real achievement—and an important lesson.
Update: 18/3/12


It is true, as German policy makers constantly point out, that fiscal consolidation and structural reform were key to Germany’s rise from being the “sick man of Europe” to its current position of strength. What they do not recognise is that there cannot be exports without imports. Germany’s export growth and huge trade surplus were enabled by borrowing by the European periphery. If the debtor countries of Europe are to follow Germany’s path without economic implosion there must be a strategy that assures increased external demand for what they produce. This could come from a German economy that was prepared to reduce its formidable trade surplus, from easier monetary policies in Europe that spurred growth and competitiveness, or from increased deployment of central funds such as those of the European Investment Bank.

Friday, March 8, 2013

Good Management Practices

During my working life, and for about thirty years as a senior manager and consultant my "frame of mind" was mostly influenced by a single article in Harvard Business Review authored by Neil Churchill and Virginia Lewis.
(I was thrilled to have the opportunity of a face-to-face discussion with Neil back in 1996 at INSEAD, when I followed the Owners/Managers Programme).

Now in retirement, I am having a "paradigm shift", having come across the work of Nicholas Bloom and John Van Reenen (pdf) "Why Do Management Practices Differ across Firms and Countries?". (Journal of Economic Perspectives, Vol.24/1)

By way of recommendation to all management practitioners let me say that it would have been a challenge to use their framework and help a Greek firm raise its management score.

Thursday, March 7, 2013

Pierre Moscovici :Λιτότητα-Ανάπτυξη-Λαϊκισμός

Διαβάζω το ρεπορτάζ του Telegraph για την ομιλία του Γάλλου (Σοσιαλιστή?) Υπουργού Οικονομίας σε conference of the European Parliament’s Socialist group in Brussels.
Ενδιαφέροντα πράγματα είχε να πεί ο υπουργός. 
Europe must focus on promoting growth and less on tightening budgets to revive the bloc's sluggish economy and avoid a deepening social crisis.
He warned that continuing on a strict austerity course would only “nourish a social crisis that leads to populism”.

Ωραία! Και λοιπόν;
Πού είναι η πρότασή του να μπεί στην agenda του Eurogroup, ή όπου αλλόυ το θέμα; Μάλλον "κουβέντες για νά γίνεται κουβέντα".
Μόλις χτές η Eurostat  έδωσε τα στοιχεία για την αρνητική ανάπτυξη στην ΕΕ και ΕΖ το τέταρτο τρίμηνο του 2012

Wednesday, March 6, 2013

For the Greek anti-austerians

We have quite a lot of anti-austerians and anti-"Merkelists"(sic) in Greece: and a good thing this is.
On the other hand some doubt the all round thinking of the anti-austerians. I don't and I think that they are ready to counter, point by point, Daniel Gros at Project Syndicate


Ten years ago, Germany was considered the sick man of Europe. Its economy was mired in recession, while the rest of Europe was recovering

A decade later, Germany is considered a role model for everyone else. 


In 2003, general government expenditure amounted to 48.5% of GDP, above the eurozone average. But expenditure was cut by five percentage points of GDP during the next five years.

during the euro’s first years, Germany was widely considered uncompetitive, owing to its high wage costs.

Germany did become competitive again – too competitive, according to some, owing to a combination of wage restraint and productivity-enhancing structural reforms.

high unemployment forced workers to accept lower wages and longer working hours, while wages continued to increase by 2-3% per year in the eurozone’s booming peripheral countries.


There is the Med way and there is the German way!

 

Tuesday, March 5, 2013

Populist clowns

Ian Buruma ; Send in the Clowns or on the topic of populism.

Joseph Stiglitz after the Italian elections

Joseph Stiglitz says that Europe needs:

  1. ... greater fiscal federalism, not just centralized oversight of national budgets.
  2. ...banking union, too. But it needs to be a real union, with common deposit insurance and common resolution procedures, as well as common supervision. and
  3. ...Eurobonds
  4. ,,, wage increases in Germany and industrial policies that promote exports and productivity in Europe’s periphery

No comment, just emphasis

Συνέδριο ΠΑΣΟΚ ..... ούτε κυμματάκια;

Ένα συνέδριο κόμματος έχει τους εξής κύριους και ελάχιστους στόχους:

  1. Αναθεώρηση και επικαιροποίηση των αρχών του. Έχει να κάνει με τους στρατηγικούς στόχους, όχι τους δικούς του αποκλειστικά, αλλά αυτούς που προτείνει στην κοινωνία. Απλές, σταράτες διατυπώσεις για να ξέρει ο πολίτης γιατί συμφωνεί ή διαφωνεί και να μπορεί να εκτιμά τις όποιες πολιτικές θέσεις άν είναι συμβατές με τις δηλωμένες αρχές.
  2. Επικαιροποίηση της οργανωτικής δομής του, και
  3. Ανανέωση/εκλογή οργάνων.
Το <1> είναι sine qua non, ιδιαίτερα στην κρίσιμη φάση που περνάει. Παρ' όλα αυτά .... ξεχάστηκε μέσα στην φούρια της ίντριγκας και των τακτικίστικων ελιγμών.
Κρίμα... 

Monday, March 4, 2013

Ireland is about to exit the programme

James Mackintosh at the FT Long Short assesses Ireland's progress towards the exit of the programme and the risks

Simon Wren-Lewis : "..badly designed EZ.."

Simon Wren-Lewis warns the powers that be to be cautious on the strength of the argument that .."greater fiscal and political integration among countries using the EURO"  is necessary, as he argues that  "..Eurozone failure is largely about bad design, rather than disproof of concept."
(SS. Column to be re-read)


Minimum Wage (revisited)

Check back my  post of 16th Feb. and continue with Jérémie Cohen-Setton, David C. Saha who exhaustively review blogs on the topic. 

Lest we forget... Eichengreen and De Grauwe .. Spring 2010

As time goes by we tend to forget
Paul De Grauwe 11.03.2010 and  Barry Eichengreen 15.04.2010

Saturday, March 2, 2013

Krugman et al on Europe....again!

Paul Krugman doesn't tire drawing attention to the damaging effects of austerity in Europe, citing Wren-Lewis and Mazower this time to underline the political risks.
Brad DeLong says:CONTRACTIONARY POLICY IS CONTRACTIONARY and links to another column by Krugman on the topic. (good reads, all)

As always, politics interferes with economics, and in Europe political choices are strongly influenced, if not outright made, by what we call the core-countries, and more concretely by Germany, who has developed as the veto political and economic player in the EE.

Now, Germany has had the best crisis among the top world economies. The political elite in Germany attribute this success to the austerity programme initiated by the SPD in the early 2000's. I, for what it 's worth, would not argue with that and have not come across a refutation.

Update: 6 March Daniel Gros ""Learning from Germany""

The problem is that the political elite, but also the German people, think that if austerity proved good for them, it will have a good outcome in the other countries of the EZ, too.

Will politics blow up Europe before the austerity fairy does its magic?